Summary:

Earnings out today from Samsung show the Korean handset maker posted record sales and profits for its telecoms division, driven primarily by…

Samsung Building (cropped)
photo: Amanda Natividad

Earnings out today from Samsung show the Korean handset maker posted record sales and profits for its telecoms division, driven primarily by strong sales of its Galaxy line of Android-based smartphones and tablets. The importance of its mobile business was highlighted even more by the sluggish results in display panels and semiconductors, which dragged down overall earnings for Samsung: the company saw a decline of 23 percent in its net income overall.

The figures give further flesh to the report out from Strategy Analytics that noted that Samsung overtook Apple (NSDQ: AAPL) as the biggest shipper of smartphones in Q3.

In results just out, Samsung said that strong sales of Galaxy smartphones were behind its highest-ever quarterly sales figures for its telecommunications division, which were 14.90 trillion won ($13.5 billion), a rise of 37 percent compared to Q3 2010. Operating profits were also record-breaking at 2.52 trillion won ($2.3 billion).

Overall revenues, however, were significantly more flat at 41.3 trillion won ($37.4 billion), up by only three percent compared to the year before. Consolidated net income declined by a whopping 23 percent to 3.4 trillion won ($3.1 billion), with consolidated operating profit at 4.25 trillion won ($3.8 billion).

Looking at other aspects of Samsung’s business, you can see just how important growth in mobile devices is to the company at the moment. Semiconductors saw little growth in sales (9.48 trillion won in Q3 versus 9.16 trillion won in Q2) and a decline in profits; while the display panel business had an operating loss of 90 billion won on revenue of 7.08 trillion won, which was down 13 percent compared to Q3 a year ago.

Currency issues and the wider economic outlook are also hitting the company. Samsung noted foreign exchange-related losses of around 420 billion won ($380 million) due to the “translation of foreign currency- denominated assets and liabilities.” On the economy, especially in the developed markets that have been driving business for Samsung, the company noted: “We cannot rule out the possibility of demand growth slowing compared to previous years,” even though Q4 is traditionally a big quarter for device companies.

More details on mobile. Samsung’s mobile division accounted for 14.42 trillion won of sales and saw big growth: Handset shipments rose “more than 20 percent” compared to the quarter before. And in terms of sales, Samsung says that sales grew by more than 40 percent compared to Q2, and more than 300 percent compared to the year before. (Once more, as a point of comparison, Apple earlier this month reported that sales of the iPhone were up 21 percent compared to last year, a significantly smaller growth curve.)

Not too many details from Samsung on what are its best-selling devices right now — and in truth the growth is probably spread across several in its portfolio — but it did note it has sold more than 10 million Galaxy SII devices since it was introduced five months ago.

In mobiles, Samsung reported an operating margin of 16.9 percent on its devices, an increase on the quarter before, said the company, but still nowhere near Apple’s numbers. In its last results from earlier this month, Apple noted that operating margins are now topping 40 percent. Samsung is still looking to drive those margins up, and noted that the ASP is still rising, despite growing competition.

Going into the fourth quarter, Samsung is continuing to launch even more devices, including different-sized tablets (in markets where it has not had any injunctions because of Apple, that is), the new 5.3-inch Galaxy Note currently being promoted worldwide, and the Nexus, which today was revealed will go on sale on November 17 in the UK.

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